And it’s not because of the polar bears, or Santa and his elves (FTs?) or reindeer.
It’s the new sea route: the NE passage. It’s nothing for the “We love to rubbish S’pore” readers of TRE and TOC to get worked up about. Very few ships use this route (I think 40 this year). And while this number will increase, most ships will sail the traditional route via the Malacca Straits. For one, ships have to be specially built for this route. First gas tanker crosses the Arctic to Japan.
When NOL is listed as the least preferred Asian container line?
When NOL annced its turnaround last week and a sale of its building, I tot “Waz wrong?”: boast turnaround yet indulge in financial engr for short term gain. Didn’t have to wait long to find out.
This is what BT, part of the constructive nation-building, 30-pieces-of -silver(?) SPH wrote earlier this week
NEPTUNE Orient Lines has disappointed some analysts with its third-quarter numbers even though it fought its way into the black with US$50 million in net profit, its first after six consecutive quarters of losses.
NOL, which owns the world’s seventh largest container line APL, fell 2.5 cents yesterday to end at $1.145.
“It underperformed just about everyone’s expectations. I’m not sure if people were expecting profit of that magnitude when the street’s view was about US$150 million,” said Timothy Ross, Credit Suisse head of transport research, Asia-Pacific. NOL is now among the least-preferred counters among Credit Suisse’s basket of seven Asian container companies.
Joining Credit Suisse in a dimmer view of NOL was CIMB, which downgraded NOL to “underperform” from “neutral”.
The problem with comparisons as distinct from Hard Truths (like Scholar is “betterest” for anything) is that they are so inconvenient that shumetimes the constructive, nation-building media must report them. Even thouh, ST has made him out to be a genius on par with the North Korean leaders who advise experts on how to do their work, BT had to report the facts saw them.
Hope this ex-general and Temasek MD doesn’t run NOL aground! The gd thing abt NOL is that it is lightly ge as the analysts sred, unlike other container lines. FTR, I got few lots. Better yield than FD.
But there are times when having scholars in senior posts helps. NSP used to hibernate between general elections. With two scholars on the executive commitee (Hazel and hubbie), NSP has decided not to indulge in its usual hibernation. It is actively walking the ground, and is finally planning a mone online. More next week.
Related post
http://atans1.wordpress.com/2012/08/16/maersk-sails-to-profit-while-nol-loses-another-mast/
(Or “Scholar, & ex SAF chief & Temasek MD runs Temasek aground”)
No need to try to do detailed study of Maersk line’s results vis-a-vis NOL.
Maersk Line, operator of the world’s largest container ship fleet, steamed to a profit of US$227m after losses of US$95m a year earlier and US$599m in the previous quarter. NOL “on underlying earnings” made US$7m. Actually “Net loss for the three months ended June 29, 2012, stood at US$118 million, which widened from a net loss of US$57 million for the same period a year ago. This result – which marks the sixth straight quarter of losses – missed market expectations of a net loss of US$67.6 million, a Bloomberg poll of six analysts showed: by 76%,” earlier post .
And Maersk Line is expecting to be profitable this financial year, while NOL says “outlook is uncertain”. And our guy’s a scholar, general, ex SAF chief and ex Temasek MD. Interestingly Maersk turned around despite the problems in Europe. For historical reasons, most of its revenue comes from ships sailing to Europe, unlike NOL which depends on revenue from ships sailing to the US, which is in better shape than NOL.
Sure hope this CEO is not from RI.
Last week, NOL posted a larger than anticipated bigger net loss (by 76%) for the second quarter compared to a year earlier, dragged down by one-off expenses linked to impairment losses and restructuring charges, it said.
Net loss for the three months ended June 29, 2012, stood at US$118 million, which widened from a net loss of US$57 million for the same period a year ago. This result – which marks the sixth straight quarter of losses – missed market expectations of a net loss of US$67.6 million, a Bloomberg poll of six analysts showed: by 76%. Loss per share for the second quarter stood at 4.57 US cents, against a loss per share of 2.21 US cents.
Excluding these charges, NOL would have registered a turnaround for its core earnings before interest and taxes (Ebit) over the year on higher freight rates and cost savings, NOL claims. It said that market conditions remain uncertain.
Funnily our constructive, nation-building media didn’t remind us of its CEO’s credentials for becoming CEO: great experience except in shipping, a specialist industry. He ain’t even a navy man.
When, Maesk’s container division reports its latest results, I’ll compare its performance (boss is a true blue shipping man) to scholar’s performance at NOL. Last time, he did badly http://atans1.wordpress.com/2012/05/25/with-ex-general-scholar-at-helm-nol-still-underperforms-maersk/.
Wonder how the soldier boy going to be SMRT’s CEO will perform? As a ex-SAF chief, the trains should run on time, and safely: unlike when a retailer ran it. Also train depots would be secured against vandals and terrorists. But can he improve its financial numbers, something the NOL CEO (another ex-general) failed to do at NOL.
Update on 16 August at 1.06pm: How the constructive, nation-building BT on 14 August reports CEO’s achievement of making US$7m on its core earnings. Sounds a story from a celebrity magazine or from the North Korean media on its new leader.
I was looking forward to comparing the 1Q results of NOL (world’s 6th largest container shipping co) and Maersk’s container division (largest in the world) because as a holder of a few NOL shares (“peanuts” but gd yield) I was interested in seeing how ex-defence chief Ng Yat Chung (and ex-Temasek senior MD) would perform. Mr Ng took over as CEO on I January 2012. He was made made executive director in April 2011. The retired CEO, a shipping man thru and thru, is now an adviser to the CEO.
At the time I asked, “Wonder what relevant experience he brings to the shipping co? I can only think of the experience in a managing big complex organisation. But then I couldn’t think of any reason for his becoming a senior MD at Temasek.”
Well NOL, and Maersk’s container division both came out with unexpectedly very bad sets of results, showing that the container shipping industry is in worse shape than expected with a weak global economy, expensive fuel and plenty of capacity coming on-line.
But NOL’s numbers were still worse than Maersk despite its focus on moving stuff between East Asia and the the US. Maersk also moves a lot of stuff to from East Asia Europe, in addition to the US. As readers will know, the US economy has performed better than the European economies in 1Q 2012.
Maesrk’s revenue was up 7% to US$6.31bn, while NOL’s revenue fell 3% to US$2.38bn. As to losses, NOL lost US$254m, while Maersk lost US$537m. Simplisticly, if Maersk had NOL’s revenue, it would have lost US$203m, i.e. 20% lower. But then along the same lines, NOL shld have made money, not lose money (US$10m) in 1Q2011.
Whatever it is, having a scholar, ex-senior MD from Temasek, and retired general as CEO of NOL, is of no benefit whatsoever when it comes to shareholder value. SIGH.
Let’s hope it’s different in the cabinet, where we have as newbies one ex-admiral and one ex-general, both of whom are scholars.
Maybe relevant, related post?
http://atans1.wordpress.com/2012/05/11/smrt-mgt-failures-what-does-it-say-abt-saf/
Investors are in the mood to take more risk in return for higher rewards. They are in “risk on” mode.
Recently, the Baltic Dry Index has fallen to a 25-year-low (since then it has risen by 1.9%) prompting concern that history is about to repeat itself. In the past, say 2008, a weak index foretold a recession, or at least an economic slowdown.But this time there been some special factors at play, according to conventional wisdom. The boom in the Baltic Dry seen before the financial crash and recession was in large part the result of a shortage of ships, which pushed up the cost of carrying freight. There are now far more ships with greater capacity and, because it has taken time for the vessels to be built, the extra capacity has become available when ship owners least want it. A, short-term factor, has been that the Chinese New Year holidays fell early this year, depressing trade in Asia.
Still a 2.9% fall in German industrial production in December suggests that the index might have collapsed due to both increased supply of shipping and weak demand. Germany is the world’s biggest exporter and the hefty slump in output at the tail end of 2011 coincided with the intensification of the crisis in the euro zone. Remember, too, that Germany exports machines to make goods to China.
Update on !0 februart 2012 at 7.05am:
Imports into China fell by 15.3% In January, and this cannot be all due to the Chinese New Year holiday factor. Exports dipped 0.5% from a year earlier hurt by sluggish demand and factories being shut during the Lunar New Year.
This resulted in a trade surplus of $27.3bn which was a six-month high.
Billionaire Wilbur Ross is betting that the slump in shipping which drove oil-tanker returns to a 14-year low is ending.
Ross & Co manages about US$10bn in assets, is part of a group (including China Investment Corp, China’s SWF) spending US$900 million on 30 ships hauling gasoline, diesel and other refined products. It is Mr Ross’s first shipping investment and deploying ‘another few hundred million’ in the industry ‘is certainly easy to do,’ he said in interviews in August.
That outlook contrasts with the pessimism of John Fredriksen, founder of Frontline Ltd, the biggest operator of the largest crude carriers. The 67-year-old billionaire said in May that it would probably be another year or two before ship values collapse and he can start adding to his fleet.
So can we imitate Ross by buying SGX counters? NOL and Samudera have container fleets. So do Pacific Trust and Rickers Maritime. BerlianLaju has the world’s 3rd largest chemical tanker fleet, more than 93 of them, but they are not the ships Ross and friends are buying.
But there is FSL. It has a fleet of 16 tankers and seven container vessels. Of the 16, 11 are product tankers (what Ross is buying), two crude tankers and three chemical tankers (presentation August 2011). But this is a tricky company to analyse, so do yr homework. It is also a shipping trust and such trusts are yield plays.
CLSA initiates coverage with a S$1.70 target price, calling the stock “Underperform”.
CLSA says, trading at 1X P/B, “NOL is neither expensive with an average 2012 to 14 ROE of 10.3 per cent nor compelling with past earnings slumps offering investors trough-0.4X P/B as a cyclical entry point.” Earnings forecasts remain materially below consensus in 2011 to 2012, “so until expectations are reset, NOL will underperform.” On NOL’s recent vessel purchase, it says “the fleet renewal provides NOL with an opportunity to remain relevant on European trade, as well as significantly reduce its unit costs”.
For the record, there have been mgt changes over the last few months with experienced mgrs leaving and an ex-general from Temasek joining.
In June NOL had its third executive resignation in less than two months, when Eng Aik Meng, president of APL – NOL’s liner arm – resigned. He will leave APL on Sept 1 and take a new position “outside the transportation industry”. Mr Eng will be replaced by Kenneth Glenn, who is currently based in Shanghai as president of APL’s North Asia region. Mr Glenn has been in the industry for 32 years and joined APL in 2000.
This change comes days after the stepping down of Bob Sappio – head of the shipping line’s Pan- American Trades It is also the second leadership change following news of the replacement of Mr Widdows, with Temasek executive Mr Ng, in April.
NOL executive director Ng Yat Chung will become chief executive officer of NOL when Mr Widdows retires at the end of the year. He is a ex-general, not admiral, from the SAF.
Ron Widdows, a shipping veteran, who is the CEO of Neptune Orient Lines Group, will be replaced by ex-defence chief Ng Yat Chung when the former retires at the end of this year. Mr Widdows will stay on as senior adviser and Mr Ng will take over as CEO on I January 2012.
Ng is presently a senior MD at Temasek.
Wonder what relevant experience he brings to the shipping co? I can only think of the experience in a managing big complex organisation. But then I couldn’t think of any reason for his becoming a senior MD at Temasek.
A leading global private equity firm has a venture with a leading owner of container ships to buy container ships. They must believe that rates will rise. The brave hearts may want to try their luck with Samudera and those shipping trusts that have fleets of container vessels.
Carlyle Group formed a joint venture with Seaspan Corp, the Washington Family and the Tiger Group to buy more than US$5 billion worth of vessels with. Seaspan and Washingtonwould invest solely in container vessels purchased by the newly formed firm. Seaspan charters container ships to shipping lines and is one of the biggest players in this market segment.
“We believe there is a compelling opportunity to serve Asia’s continuing growth in demand for shipping capacity.” The joint venture will invest equity capital of US$900 mill ion in the next five years, buying container, dry bulk, tanker vessels and other shipping assets.
Don’t focus on rising NAVs.
Focus on their ability to service their debts and the options they have to refinance. The improvement in NAVs is a subset of these issues.
First Ship Lease Trust offers a gd yield (a shade under 11%%) and trades (46.5cents) at a respectable discount below last reported RNAV of 57cents.
But as DBS Sec which calls it “Hold” says
While the distribution per unit (DPU) payout was maintained at 0.95 US cents for the quarter, the trust had to draw down US$0.7 million of working capital to distribute the US$5.7 million to unitholders, after the usual quarterly loan repayment of US$8 million.
The product tankers continue to be deployed in the spot voyage markets, but utilisation rates and net bareboat equivalent income remain below expectations. While freight income was higher q-o-q in Q4 2010, expenses were higher as well and the two tankers generated bareboat charter equivalent revenue of US$0.2 million in Q4 2010, compared to the US$3.8 million revenue per quarter applicable during the original charter. With tanker rates unlikely to perform in the near term, we choose to remain conservative on our earnings assumptions from these vessels in FY2011.
While the trust did not provide an update on fleet valuation of US$700 million as at end-Q3 2010, a big change is unlikely. This puts the current value- to-loan ratio at 154 per cent, and implies about 160 per cent coverage at the end of the waiver period in June 2011, above the requirement of 145 per cent. We expect DPU payouts to remain at the current level in the near term, and given that we have not yet seen any acquisition funded by the US$28 million placement proceeds raised in FY2009, we maintain our ‘hold’ call at an unchanged target price of $0.45.
